Initial deficit overcome through budget cuts

Having originally forecasted a deficit of $90,000 for the 2013-14 fiscal year, the Students’ Society of McGill University (SSMU) has recently revised its budget with the aim of improving its financial situation. The revised budget now breaks even, after $50,000 saved from cuts was transferred to a fund for long-term expenditures, as per SSMU bylaws.

SSMU was able to significantly reduce its deficit by cutting executives’ personal budgets, as well as General Administration, Building, Club, and Information Technology (IT) budgets. The official report on the budget states that the most significant cuts occurred in the General Administration category – which, according to the report, totalled $85,568.

Further examination reveals that approximately $74,600 of this amount arises from cuts in salaries and benefits of employees. The report explains that the Student Salaries Budget has been reduced by 10 per cent in order to account for the fact that 90 per cent of the budgeted hours for student staff are worked.

“The cuts were decided based on SSMU’s stated values and the overall services that we provide to students. The cuts were made as to minimize their effect on the services that SSMU provides,” VP Finances and Operations Tyler Hofmeister told The Daily when asked about how these cuts were determined by SSMU.

However, Hofmeister said that he could not disclose which categories of employees would be most affected by these cuts, for legal reasons.

This projected $50,000 surplus is to be transferred into a fund known as the Capital Expenditures Reserve Fund (CERF). In 1985, SSMU created the CERF to set aside money for long-term expenditures, renovations, student projects, and the like. Excess revenues are transferred to the CERF and the Student Life Fund annually, as deemed necessary. Sometimes money is transferred out to cover deficits, as happened last year when SSMU’s deficit of $211,320 was covered by money out of the CERF.

Hofmeister stated that the previously projected $90,000 deficit for this fiscal year was very high because it “includes a conservative amount for rent and utilities given the current state of lease negotiations.”

“Currently, SSMU has not been paying its lease during negotiations, but once an agreement is signed, SSMU may have to pay retroactively so it is important that [these potential costs are] included,” said Hofmeister.

One large expense that contributed significantly to the deficit was the $21,000 loss incurred at this year’s Frosh, a fact confirmed by Hofmeister. According to an answer VP Internal Brian Farnan gave at SSMU’s Special General Assembly on November 13, accounting mistakes were to blame for the majority of the five-figure loss.

SSMU used PayPal for Frosh, but miscalculated the percentage of fees that the company asked for. Money was also lost through sponsorship, as SSMU made mistakes calculating taxes. A new system that split up sponsorship revenues between faculties also contributed to the errors. According to Farnan, the approximately $200,000 Frosh budget will be maintained next year by SSMU’s accounting department, instead of SSMU executive members.

In a recent interview with the McGill Tribune, SSMU President Katie Larson suggested that the SSMU base fee might need an increase in order to accommodate future deficits. Hofmeister told The Daily that “a student referendum would be required” to change the base fee.

Another alternative could be “changing the investment portfolio to an endowment fund,” which would require “chang[es to] the relevant bylaws and would require the approval of [Legislative Council],” said Hofmeister.

Although SSMU cut its budget in its General Administration department, it also increased spending for areas such as contract services and interest fees from bank charges. Furthermore, SSMU has also increased its spending on security, as they are considering hiring more security and outsourcing less.

The IT department is also facing large expenses, as much of their hardware is out-of-date and needs to be replaced. Although a portion of this year’s budget is allocated to it, some purchases are being pushed back a few years in order to reduce financial pressures, setting SSMU up for a potential deficit in the future.

In an earlier version of this article, The Daily stated that the revised budget included a $50,000 surplus. In fact, the $50,000 in question was transferred into the Capital Expenditures Reserve Fund, and the operating budget broke even. The title of the article has also been changed to reflect these facts. The Daily regrets the errors.